Extra Space Storage, Abbott Laboratories, First Data, ServiceMaster Global Holdings and ABM Industries highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL - February 08, 2016- Zacks Equity Research highlights Extra Space Storage ( EXR ) as the Bull of the Day and Abbott Laboratories ( ABT ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on First Data Corporation ( FDC ), ServiceMaster Global Holdings, Inc. ( SERV ) and ABM Industries Inc. ( ABM ).
Here is a synopsis of all five stocks:
It has been a very rocky time for the stock market which is putting extra focus on companies in safer sectors. One area that is gaining renewed traction is the REIT market as this space benefits in a lower interest rate environment and it pays out solid yields too.
While there are many options here, one to put on your radar right now is Extra Space Storage ( EXR ) . The company pays out a nice yield, has a great growth rate, and best of all, EXR has a great track record. Just take a look at the recent performance of EXR compared to the market:
But that isn't the only reason to like EXR these days, as the company still has plenty of potential going forward. In fact, if we look to recent earnings estimate revisions, there is definitely hope that EXR can keep up its outperforming ways in the months ahead.
The most recent earnings estimate revisions for EXR stock have been extremely positive, as we haven't seen an analyst ratchet down their expectations for either the current year or current quarter projections in the past sixty days.
The consensus estimate is moving higher too, as the current quarter has gone from $0.81/share 90 days ago to $0.87/share today. We have seen a similar trend for the full year time frame, pushing EXR up to an expected EPS growth rate of just under 20%.
And if that wasn't enough, EXR also has a great history at earnings season, including four straight beats. The company is clearly well-positioned for a beat at its earnings report later this month, and it could be a good candidate for a modest positive EPS surprise. No wonder EXR has earned itself a Zacks Rank #1 (Strong Buy), putting it into the top 5% of all companies that we follow.
The market has been rough lately so it might be an excellent idea to go with a proven winner in a strong industry. EXR is just that thanks to its history of outperformance, beats in earnings season, and its nice dividend too.
So if you are looking for a stock to get you through this uncertain time in the market, it may be time to give Extra Space Storage a closer inspection for your portfolio.
Although many large caps in the health care world have held up pretty well in this uncertain environment, the same cannot be said for Abbott Laboratories ( ABT ) . Shares of this Illinois-based giant have fallen more than 15% this year, more than doubling the loss that the S&P 500 has seen so far in 2016.
While much of these losses are a result of the overall poor trading environment to start the year, a big percentage of the slump can also be blamed on Abbott's most recent earnings report. In this release, Abbott managed to beat estimates by a penny, but struggled on the revenue front and gave weak guidance too. Thanks to this, analysts tracking ABT have been racing to slash their earnings estimates for Abbott stock, suggesting that the pain for ABT investors isn't over by a long shot.
There has been total agreement among ABT analysts regarding the company's near term outlook as seven analysts have pushed estimates lower for the current quarter in the last seven days compared to zero higher, while we have seen an 11:0 ratio for the current year in the same time frame too.
These estimate cuts haven't just been one or two cents lower either, as we have seen some big changes in the consensus estimate over the past month. The current quarter is down to a 39 cent consensus profit, down from 50 cents a few weeks ago, while the current year has fallen about 24 cents down to $2.15/share in EPS.
Now, EPS is expected to contract more than 17% this quarter when compared to the year ago period, while the full year growth is expected to come in at 0.0% when compared to the previous year. No wonder ABT is now a Zacks Rank #5 (strong sell) stock that is currently ranked in the bottom 5% of our overall universe of securities.
3 Business Services Stocks to Bet on Amid Q4 Earnings Conundrum
The U.S. economy had an unenterprising end to 2015 as the GDP increased at a paltry 0.7% annualized rate in the fourth quarter, bringing its tally for the year to 2.4% - identical to that recorded in 2014. Although the Fed took off its brakes for the first raise in interest rates in nearly a decade in December, on perceived improvement in the economy, the short-term jitters are likely to prevent it from raising it further anytime soon.
On the surface, it appears that the economy failed to receive any 'slingshot' momentum from strong third-quarter growth, primarily due to the fallout of the growing global malaise on domestic activity. Strong dollar appreciation and the prevailing macroeconomic turmoil, led by the unprecedentedly-weak Chinese growth and a soft European market, continue to adversely affect exports and corporate investment levels.
Solid appreciation of the dollar has dented the export basket, as the U.S. goods and services have been rendered expensive upon foreign soil. The trade deficit widened to $566.5 billion and has reportedly subtracted 0.47 percentage point from the GDP growth in the fourth quarter. Lower oil prices have further added to the woes of the industries that directly or indirectly source businesses from the energy sector.
The Negative Feelers
Non-defense capital goods orders (excluding aircraft), one of the closely watched parameters for business spending plans, contracted 4.3% in December - the largest decline of this kind since November 2009. Business spending on equipment contracted 2.5% in the fourth quarter compared to a 9.9% rise in the third quarter.
With low demand for U.S.-manufactured items, businesses accumulated $68.6 billion worth of inventory in the fourth quarter, shaving 0.45 percentage point from the fourth-quarter GDP growth. Weighed down by higher levels of inventory, overall business investment declined at an annualized rate of 1.8%, the first drop since the third quarter of 2012.
The Markit Composite Purchasing Managers Index (PMI) data declined to 53.2 in January from 54.0 in December. This represents a general slowdown in new business growth and a cautious spending pattern by clients.
The Positive Vibes
When the overall business sentiments are somewhat reeling under the bearish market stance, American households have plenty to rejoice. Buoyed by an average of 284,000 job additions in the fourth quarter, the unemployment rate stood at 5% by the end of 2015 and is expected to fall further.
Enjoying the fruits of a resurgent job market, low inflationary pressures and cheaper oil bills, consumer confidence levels went up. The Conference Board Consumer Confidence Index improved moderately in January to 98.1 from 96.3 in December. Consumer spending, which accounts for over two-thirds of U.S. economy, increased 2.2% during the fourth quarter.
As the companies take stock of the situation and deliberate on their future course of action, let us take a glimpse into how the fourth-quarter earnings season is shaping up so far.
Business Services Sector Performance
About 47.8% of the total S&P 500 companies in the Business Services sector have reported their earnings results till Feb 3, 2016. With a 'beat ratio' of 72.7%, total earnings for these companies are up 4.1% year over year. Revenues increased 2.5% compared with the year-ago period, with a 'beat ratio' of 27.3%. The entire Business Services sector is expected to perform relatively better than the overall equity market with an earnings growth expectation of 3.4% in the fourth quarter versus -5.8% for the S&P 500 index. (Read: Q4 Earnings Season Past the Halfway Mark )
The primary growth drivers in this highly fragmented industry hinge on a healthy economy with decent prospects for job growth, higher disposable income and new business initiatives. An ideal mix of services, effective marketing strategies and ability to retain and attract new customers make the perfect recipe for profitability for most of these companies.
Given the forecast, it might be a good idea to zero-in on a handful of Business Services stocks that are poised to beat earnings estimates this quarter. An earnings surprise should help these stocks outperform in the near term.
How to Pick?
The Business Services sector covers an array of services that include marketing, consulting, staffing, security, telecommunications, Internet services, logistics and waste handling. Amid a diverse range of companies in the Business Services arena, picking the right stock for your portfolio could appear to be a colossal task. An easy way to narrow down the list is to look at stocks that have a solid Zacks Rank and a favorable Earnings ESP .
Earnings ESP is our proprietary methodology for determining which stocks have the best chance to surprise with their next earnings announcement. The Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
The combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) or #3 (Hold) and a positive Earnings ESP is usually a harbinger of an earnings beat and serves a perfect success formula on a platter. For investors seeking to benefit by applying this strategy to their portfolios, we have mentioned three Business Services stocks below, which match these criteria, and thus may be potential winners this earnings season.
First Data Corporation ( FDC ): Founded in 1989 and headquartered in Atlanta, GA, First Data offers electronic commerce and payment solutions across the globe. The company serves approximately six million business locations and 4,000 financial institutions in 118 countries around the world.
The company has a long-term earnings growth expectation of 18.6%. First Data currently carries a Zacks Rank #1 along with an Earnings ESP of +5.26%. The company is expected to report its fourth-quarter 2015 results after the closing bell on Feb 9.
ServiceMaster Global Holdings, Inc. ( SERV ): Headquartered in Memphis, TN, ServiceMaster is a premier business services provider of essential residential and commercial services. The company operates through an extensive service network of more than 8,000 company-owned, franchised and licensed locations.
This Zacks Rank #2 stock has a long-term earnings growth expectation of 11.0%, forward PE of 20.0x and an Earnings ESP of +3.23%. The company is scheduled to report its fourth-quarter 2015 results before the opening bell on Feb 25.
ABM Industries Inc. ( ABM ): Headquartered in New York, NY, ABM is one of the largest facility management services providers in the U.S. The company provides engineering, janitorial, parking, and security services to commercial, industrial, institutional, and retail facilities across the country.
The company has a long-term earnings growth expectation of 8.0% and a forward PE of 20.0x. ABM currently carries a Zacks Rank #3 along with an Earnings ESP of +38.46%. The company is expected to report its first-quarter fiscal 2016 results on Mar 1.
Gus Faucher, senior economist at PNC Financial Services in Pittsburgh, observed: "Together with rising wages, more hiring will allow consumers to continue to spend, and that will be more than enough to power through weakness from trade and the stronger dollar." As the U.S. stocks appear volatile with a topsy-turvy economy, a sneak peek to the space for some possible outperformers backed by a solid Zacks Rank and a positive Zacks Earnings ESP could be a great idea for investors to gain from this earnings season.
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